Conflict Minerals June 12, 2014. Agenda  What is Conflict Minerals?  How does a company ensure Conflict Minerals Compliance?  What is the impact CM.

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Presentation on theme: "Conflict Minerals June 12, 2014. Agenda  What is Conflict Minerals?  How does a company ensure Conflict Minerals Compliance?  What is the impact CM."— Presentation transcript:

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5 Conflict Minerals Rule Compliance Overview First of the annual SEC filings is due no later than May 31, for previous calendar year. Compliance requirements include: Step 1 : Determine whether each product is subject to conflict minerals rules Yes, if conflict minerals are “necessary to production or functionality” of a product that we sell and that we manufacture or “contract to manufacture” Step 2 : Develop and conduct reasonable country of origin inquiry (“RCOI”) If we know or have reason to believe that conflict minerals in our products originated in the covered countries, and did not come from scrap or recycled sources, must proceed to Step 3 (Supply Chain Due Diligence) Step 3 : Exercise due diligence on the source and chain of custody of our conflict minerals (follow recognized framework UN OECD) Must ultimately determine whether our purchase of parts/components containing 3TGs is financing the rebel groups in the DRC

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The process of determining if products are covered under the conflict minerals rules involves multiple validations. Note – products that cannot be ruled out must be left in-scope. Product A Product C Product B Product D Enter “Stream of Commerce”? Product A Product B Manufacture or Contract to Manufacture Product? Product D Contain 3TG? Product B Product D Product E Product B Product sold to a customer, during the reporting year For service companies this is more difficult in that primarily services are being sold, Product Applicability Considerations If manufacture, or contract with a 3 rd party to manufacture, a component or product, then it remains in scope and needs to be examined for conflict minerals. If some influence over the manufacturing or design of any components or parts, they should remain in consideration. If unknown whether components/products contain CM, then must inquire of suppliers (reasonable country of origin inquiry (RCOI)). necessary to functionality; necessary to production : if the 3TG is contained in a product that we manufacture or that is manufactured for us, and is intentionally added, it is in scope. In-Scope Products Step 1 -- Determining Product-Level Applicability 6

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Companies are required to conduct and inquiry to the suppliers of the 3TG parts as to the source and status of the minerals. Requesting a response at the part level is needed to know your source mineral for products sold. 7 Step 2 --Conducting Reasonable Country of Origin Inquiry

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Step 3 –Due Diligence – Smelter Certifications 8 As a result of the RCOI, companies who knew some or all of their mineral sources would list them. http://www.conflictfreesourcing.org/

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Step 2 –Why Conflict Free is so hard to achieve 9 Example : Part containing 3TG – Supplier response at Company Level This supply chain remains undetermined, this response is not for a part, rather for all the parts from a supplier. Even with the Smelters listed and Conflict Free, it still does not tell what sources and origins for a particular part.

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Step 3 Due Diligence 10 We are required to perform due diligence on any suppliers responses that source from the DRC or adjoining countries according to a specific recognized framework. OECD DD Guidance is 5 step process. http://www.oecd.org/daf/inv/mne/GuidanceEdition2.pdf

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Independent Private Sector Audit (ISPA)*  Each company that is required to furnish a conflict minerals report must also obtain and furnish an independent audit of the report. (to start 2 yrs. for big, 4 yrs. for small cos. - no audit needed)  Option for an Attestation or Performance Audit (done by CPA or by certified non-CPA auditor)  Auditor to examine the design of the due diligence framework described is accordance with a nationally or internationally accepted framework and that the due diligence described is actually what the company undertook. 12 * * Intel is the only company I am aware of that had an ISPA.